China still lead buyer of U.S. securities

Global demand for U.S. securities is still strong, with China remaining the largest foreign holder of U.S. debt, according to the Treasury Department's latest report on foreign holdings.

The U.S. government's top international creditor continued to add to its holdings, albeit modestly, according to the July Treasury International Capital report, which measures the flow of funds into and out of U.S. securities, including Treasuries, agency-backed securities, corporate debt and stocks, as well as banking capital flows.

In July, Chinese investors increased their holdings by $2.6 billion to $1.15 trillion.

But China cut its overall purchases of U.S. securities this year, paring back its total holdings by $2.3 billion since January. And over the past 12 months, China's purchases have declined by $165 billion.

Japan, the second-largest holder of U.S. debt, upped its holdings by $7 billion to $1.12 trillion in July. Unlike China, Japan has added some $59 billion worth of U.S. securities to its holdings since the star to the year. And over the past 12 months, Japanese investors have poured $232 billion into U.S. assets.

"With choppy financial markets and volatility in Europe, which were both widespread in July, private investors abroad purchased more Treasuries than any other asset class in July," said Wells Fargo economist Tim Quinlan in a note to clients.

Fast forward to last week's Federal Reserve announcement that it would buy $40 billion of mortgage-backed securities to help stimulate the economy. The news sparked a big rally on Wall Street as optimism pushed investors to riskier assets, such as stocks.

Catherine Tymkiw is a news editor at CNNMoney where she helps oversee breaking news coverage and futures planning. Previously, she was the investing editor. Prior to joining CNNMoney, she was the online editor at Crain's New York Business and has nearly two decades of reporting and editing experience. She tweets @ctymkiwcnn